Is Dell Wising Up With Wyse?
Iconic PC maker Dell (NAS: DELL) keeps pushing into software and services. The company has just announced that it intends to acquire Wyse Technology, a company that specializes in cloud software and virtualization.
Wyse also makes "thin-client" hardware and software, which are like terminals that lean on other computers (like servers, for example) for most of the heavy lifting. Dell didn't break out financial details about the transaction, but analysts think it probably fell in the ballpark of $350 million to $400 million.
Dell did say that Wyse should be accretive to non-GAAP earnings by the latter half of fiscal 2013, with the deal expected to close in the second quarter of fiscal 2013.
Wyse already plays nicely with the kingpins of virtualization, Citrix Systems (NAS: CTXS) and VMware (NYS: VMW) , which should complement their respective virtual desktop infrastructures. Dell's hoping that the acquisition will help it further tap the datacenter infrastructure market, which is supposed to top $15 billion in the next three years.
The deal follows other software-driven acquisitions in recent times, after Dell formed a new software group two months ago. The company is obviously looking to boost margins and growth through differentiated services and also acquired SonicWall (security software) last month and AppAssure (backup and recovery software) in February.
The Wyse deal bears an uncanny resemblance to when Hewlett-Packard (NYS: HPQ) acquired thin-client specialist and Wyse rival Neoware five years ago. Both HP and Dell have been pretty clear in recent times with their intentions to be likeIBM.
HP wanted to spin off its PC business like Big Blue did long ago, while Dell keeps adding pieces to its Big Blue puzzle. It's no wonder when you look at where IBM's profit margin has been going ever since selling its PC business to Lenovo in 2005.
IBM-esque transformations take time, and until then I still don't see a lot going for Dell. Its mobile strategy is in shambles, as Dell has killed both its domestic smartphone and tablet lineups. There's no doubt that it's trying to regroup with mobile, but the company has mostly missed out so far. While Dell is trying to be like IBM, it's a far cry away from competing, since IBM is IBM.
With more than $62 billion in revenue over the past four quarters, these incremental acquisitions are a long way from reshaping Dell into the spitting image of its Big Blue role model.
At the time this article was published Fool contributorEvan Niuholds no position in any company mentioned. Check out hisholdings and a short bio.Motley Fool newsletter serviceshave recommended buying shares of VMware.Motley Fool newsletter serviceshave recommended writing covered calls on Dell. The Motley Fool has adisclosure policy. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.
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